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How do you understand our democratic process works? Maybe something like this. The public votes for MPs. They debate and pass bills. When a majority is achieved, the bills are enacted as law. Statutes is maintained by the courts. Simple as that. Well, that’s how it used to work. No longer.

The Rise of Shadow Courts

Nowadays, overseas companies, and the wealthy individuals that control them, are able to litigate against elected administrations for the policies they pass, at secret arbitration panels staffed by commercial attorneys. Such disputes take place behind closed doors. In contrast to domestic courts, these bodies provide no right of appeal or oversight by judges. You or I cannot take a case to them, nor can our government, including companies based in this country. Access is granted solely for corporations registered abroad.

If a tribunal determines that a government measure may compromise the corporation’s anticipated profits, it has the power to grant damages of hundreds of millions of pounds, running into billions.

These sums constitute not actual losses but compensation the panel members determine the company could potentially have made. The government might be compelled to drop the legislation. It will be hesitant to passing future laws in that area, worried about facing litigation.

A System Growing Exponentially

Record numbers of cases are being brought, as firms take cues from each other, and investment funds fund legal actions in exchange for a share of the awards. The result? National sovereignty and popular rule are becoming unaffordable.

This mechanism is known as “investor-state dispute settlement” (ISDS). The reason it is permitted to override national legislation and the rulings enacted by elected bodies is that this provision has been inserted – without public consent, and often in a climate of profound opacity – inside trade treaties.

A Concrete Case: The Cumbrian Coal Mine

Last year, environmental campaigners won a great victory at the High Court. The presiding officer ruled that plans to excavate the first deep coalmine in the UK for three decades, in northwest England, were wrongly permitted by the Conservative government, which had agreed to the questionable argument that the mine could have zero effect on climate commitments. The incoming administration later cancelled the permission the former government had approved. Today, this victory could be compromised by an secret arbitration panel answering to only the entities petitioning it.

In August, a corporate entity whose ultimate owners are located in the Cayman Islands lodged a claim against the UK government. The previous week a arbitration panel in the United States was established to hear it.

The company is seeking compensation from the UK for the revenue it could have earned if the mine had been allowed to proceed. The public has no idea how much this sum represents. Who is acting on its behalf against the British government? A member of parliament, and previous senior legal advisor in the Conservative government, the self-proclaimed patriot Geoffrey Cox. The government makes a decision, the high court supports it, then a overseas corporation disputes it through an unaccountable private court, and a sitting MP represents its behalf.

The Russian Lawsuit

On the same day that the panel on the mining lawsuit was appointed, information emerged from a government response that the UK is also being sued under ISDS by a wealthy Russian individual, a sanctioned individual. We know nothing of the case at present, but it seems likely that he will utilise the tribunal to fight the sanctions the UK levied against him subsequent to the invasion of Ukraine. He has already filed a claim against another European state with similar intent, demanding $16bn: half that state's yearly income. Included in the counsel representing him there? Cherie Blair, married to the former British prime minister.

Legal experts argue that the EU’s hesitation in utilising seized Russian assets as security for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the ISDS tribunals, under a investment pact. This extraordinary, secretive influence over democratic administrations might be preventing the funds Ukraine desperately needs.

False Assurances and Mounting Costs

The public was told that such things could not occur. Years ago, a government leader, championing the biggest and most dangerous of all investment pacts, told us: “We’ve signed trade agreement after trade deal and we have never seen a problem in the past.” A consultant on this issue accused critics of “alarmism … the fact is, ISDS has little impact on the UK much”. The prevailing narrative seemed to be that only poorer nations should be concerned by these lawsuits. Cautionary notes that “when companies begin to understand the authority they now possess, they will turn their attention from the weak nations to the developed economies” were met with scepticism.

That warning has now materialised. In the current period, fossil fuel and extraction companies have initiated a unprecedented number of claims against nations rich and poor, challenging – like the example of the Cumbrian coalmine – official measures to halt climate breakdown. Corporations have thus far won $114bn through ISDS, of which oil majors have been awarded eighty-four billion dollars. That represents the combined GDP